Nationstar and REIT Agree to Buy ALS' MSRs

Nationstar Mortgage and an affiliate company Newcastle Investment Corp. have agreed to acquire roughly $63 billion in mortgage servicing rights from Aurora Bank, a subsidiary of the bankrupt Lehman Brothers.

Newcastle, a publicly traded REIT, will pay $170 million to acquire a 65% stake in what are described as “excess” MSRs derived from the transaction. The MSRs were housed at Aurora Loan Servicing, Denver, a subsidiary of the bank.

Nationstar will initially buy the MSRs, and then service the underlying loans. The Lewisville, Texas-based mortgage company is owned by Fortress Investment Group which shares a chairman, Wesley Robert Edens, with Newcastle.

The purchase will make Nationstar the nation's seventh largest servicer overall with receivables of close to $170 billion, according to figures compiled by ASR sister publciation National Mortgage News and the Quarterly Data Report.

Last month NMN broke the news that Nationstar was likely to buy the ALS MSRs.

The sale was announced Tuesday morning.

Roughly 75% of the portfolio is comprised of non-conforming loans that have been sold into private label MBS. The balance is conforming product.

The sale is expected to close in the second quarter of 2012 and is subject to regulatory and third-party approvals.

“Under the terms of this investment, to the extent that any loans in this portfolio are refinanced by Nationstar, the resulting mortgage servicing right will be included in the portfolio, subject to certain limitations,” said Newcastle in a statement. “This should serve to significantly reduce the impact of prepayments on our investment. Newcastle will not have any servicing duties, advance obligations or liabilities associated with the portfolio.”

It is the second excess MSR deal that Newcastle has completed within three months.

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